Google Selling Motorola, Keeping Patents

Less than two years after acquiring Motorola Mobility for $12.5 billion, Google Jan. 30 said it is selling the mobile phone manufacturing unit to Lenova for $2.9 billion.

Since the acquisition, Google sold off Motorola’s set-top business for $2.3 billion to Arris. Motorola had $2.9 billion in cash when Google acquired it.

Google’s primary reason for acquiring Motorola was not to get in the smartphone manufacturing business. Instead, the Internet search behemoth coveted Motorola’s technology — specifically 15,000 patents — the majority of which it retains ownership of and can now license to competitors.

"The smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices," CEO Larry Page said in a blog post announcing the sale. "This move will enable Google to devote our energy to driving innovation across the Android ecosystem."

The NPD Group said the smartphone business has become increasingly competitive, with few OEMs really making a clear success of it. Indeed, 68% of the U.S. smartphone market is dominated by two OEMs: Apple and Samsung. Motorola accounts for a mere sliver of the market at roughly 8%.

While Google tried to promote a different Motorola (after the purchase), with talk of a modular device and the latest, customizable Moto X phone, the reality is that there has not been an iconic launch to boost the company’s market share. And, ironically, Google’s own Nexus 5.0 smartphone was built by LG, not Motorola.

Eddie Hold, VP, connected intelligence at NPD, said the focus now is on Microsoft, which is in the midst of acquiring Nokia. Google’s departure from the smartphone device business might raise further concerns that an operating system owner (Android) cannot be a smartphone manufacturer as well — a POV to which Hold doesn’t subscribe.

“I would argue that Windows Phone and Android are at very different stages of maturity, and the Nokia deal still makes sense to Microsoft, which needs to continue to drive innovation toward the Windows platform in order to gain market share for Windows Phone,” Hold wrote in a blog post.